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OSFI releases first Annual Risk Outlook

May 19, 2022

The Office of the Superintendent of Financial Institutions (OSFI) released its first Annual Risk Outlook. This new document provides details of the risks facing Canada’s financial system and our plans to address them in the coming year.

The 2022-2023 Annual Risk Outlook describes risks to the financial system ranging from cyber attacks and digital innovation to housing-related considerations, climate change and more. This is not an exhaustive list but rather the risks that OSFI considers most critical. Each risk is viewed through our prudential mandate and is accompanied by the supervisory and regulatory actions that we are taking. A table providing the timing and topics of consultations and guidance is included to help institutions and Canadians know how to best engage with us.

Review the press release on the OSFI's website.

ISSB Image

ISSB success also requires action by others

May 18, 2022

On May 18, 2022, the IFRS Foundation’s International Sustainability Standards Board (ISSB) published a summary of the necessary steps required to establish a comprehensive global baseline of sustainability disclosures.

The announcement highlights that the ISSB’s global baseline presents a unique opportunity to reduce the existing and further fragmentation of sustainability disclosure requirements and that widespread use of the baseline will reduce the costs for data preparers and improve information usability for data users. It also outlines the steps the ISSB has taken, and is taking, to have completed by the end of 2022 the necessary institutional and technical standard-setting work to establish the core elements of the global baseline. Nevertheless, the announcement also stresses that achieving this goal will require actions by others, in particular by jurisdictional authorities and market participants. It states:

Once in place, the future success of the global baseline will depend on combined action by public authorities to incorporate it into their jurisdictional reporting requirements, and market demand through investors and others encouraging use of the ISSB’s IFRS Sustainability Disclosure Standards. The ISSB reaffirmed its commitment to work collaboratively with jurisdictions and stakeholders in pursuit of this public interest objective and is poised to engage proactively as jurisdictions and other stakeholders begin their evaluation of the ISSB’s standards.

Review the full announcement on the IFRS Foundation's website.

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IESBA discussion on sustainability and ethics

May 18, 2022

This IESBA Sustainability and Ethics Discussion examines the critical role that complying with ethics standards, including on independence, plays in ensuring reliable and trustworthy sustainability information.

The one-hour, live-streamed conversation provided key insights about the applicability of the International Code of Ethics for Professional Accountants (including International Independence Standards) to the preparation and presentation of sustainability information and the provision of assurance thereon.

Watch the video on the IESBA's website.

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FRC publishes thematic review findings on discount rates

May 17, 2022

The UK Financial Reporting Council (FRC) published a thematic review on discount rates used under IFRS Standards.

The report notes that while discounted cash flows and discount rates are commonly used under IFRS, determining an appropriate discount rate is a complex area of financial reporting and can be an area of significant estimation uncertainty and a source of errors in financial reporting. 
 
The FRC’s review found:

  • Assumptions used for discount rates and cash flows should be internally consistent, and care should be taken to avoid double-counting risks. When nominal rates are used, the effects of inflation on the cash flows should not be overlooked; particularly in the current interest rate environment of low nominal interest rates and relatively high inflation.
  • There is general scope for improvement in the usefulness of the disclosures provided by many companies, with high quality disclosures including both the discount rate used, and an explanation of how it was determined.
  • Companies may need to consider whether specialist third party advice is required when valuing a material item, and where there is no internal expertise.

The review includes some case studies, based on issues the FRC finds in its routine monitoring of corporate reporting, to illustrate some of the challenges which companies may face in this area.
 
To encourage improvement in the general quality of company disclosures, the review also includes examples of good practice where companies have clearly described the factors they considered in determining the discount rate; for example, explaining whether  risk and inflation were included in the cash flows or the discount rate.
 
Read the full review on the FRC's website.

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IASB issues May 2022 'Investor Update' newsletter

May 16, 2022

On May 16, 2022, the International Accounting Standards Board (IASB) issued the latest edition of its newsletter "Investor Update", which profiles recently introduced IFRS Standards and other changes that are in the pipeline as well as how those changes may affect companies and performance.

This issue features:

  • In profile — Dr Kenneth Lee, Associate Professorial Lecturer at the London School of Economics and Political Science, member of the Capital Markets Advisory Committee
  • We need your views — IFRS Sustainability Disclosure Standards
  • Stay up to date
  • Resources for investors

Review the Investor Update newslet­ter on the IFRS Foundation’s website.

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Leaf - sustainability (green) Image

IPSASB consultation paper on natural resources

May 16, 2022

On May 16, 2022, the International Public Sector Accounting Standards Board (IPSASB) issued a consultation paper "Natural Resources".

The introduction to the consultation paper notes that natural resources are generally understood to be resources such as sunlight, air, water and land that exist without the actions of humankind. They account for a significant proportion of the economic resources in many jurisdictions. However, governments often lack sufficient information on the monetary value of natural resources, and as a result, grant rights to these resources without regard to financial and environmental sustainability, or intergenerational fairness.

Currently, there is no explicit International Public Sector Accounting Standard (IPSAS) guidance on accounting for natural resources in their original state. Therefore, the IPSASB is now working to address this gap. The first phase of its work focuses on the financial reporting of tangible, naturally occurring resources, including subsoil resources, water, and living resources, which are in their natural state. This consultation paper is the first project output, and considers whether natural resources can be recognized as assets in general purpose financial statements or should be disclosed in broader financial reports.

Comments on the consultation paper are requested by October 17, 2022.

Review the press release and the consultation paper, video introduction and an At a Glance summary on the IPSASB's website.

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Securities - AMF Image

Canadian securities regulators authorize discontinuation of the Canadian Dollar Offered Rate

May 16, 2022

On May 16, 2022, the Ontario Securities Commission (OSC) and the Autorité des marchés financiers (AMF) published notices authorizing the discontinuation of the Canadian Dollar Offered Rate (CDOR), a designated critical benchmark.

Refinitiv Benchmark Services (UK) Limited (RBSL) is the administrator of CDOR, a domestically important interest rate benchmark. The OSC and the AMF, as co-lead authorities for RBSL and CDOR, previously designated CDOR as a designated benchmark and RBSL as its designated benchmark administrator.

The authorization notices issued by the OSC and the AMF authorize the request by RBSL to cease publication of CDOR after June 28, 2024

On December 16, 2021, the Canadian Alternative Reference Rate Working Group (CARR) published a white paper recommending the discontinuation of CDOR over a two-stage transition period. The findings and recommendation reflect global efforts to reform major interest rate benchmarks, including plans to replace key interbank offered rates with risk-free reference rates.

Following CARR’s recommendation, RBSL issued a public consultation on January 31, 2022, seeking stakeholder feedback on the impact of the discontinuation of CDOR. RBSL published today an outcome statement on the results of its consultation and a notice announcing it will cease publication of CDOR after June 28, 2024.

Review the press release on the OSC's website.

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Leaf - sustainability (green) Image

IPSASB launches global consultation on public sector sustainability reporting

May 09, 2022

On May 9, 2022, the International Public Sector Accounting Standards Board (IPSASB) issued a consultation paper "Advancing Public Sector Sustainability Reporting".

The introduction to the consultation paper argues that while there has recently been significant progress towards the development of a global baseline for sustainability reporting in the private sector, public sector sustainability reporting has yet to move forward in the same way. At the same time, the paper goes on to state, governments are significant in expenditure and employment terms in all jurisdictions, as well as in the global bond market. How and where they spend the money they raise through the taxes everyone pays will therefore be critical in successfully delivering the United Nation’s Sustainable Development Goals.

The consultation paper now released proposes the IPSASB:

  • serve as the standard setter for global public sector specific sustainability guidance, drawing upon its experience, processes, and global relationships;
  • develop initial guidance focused on general disclosure requirements for sustainability-related information and climate-related disclosures; and
  • approach guidance development at an accelerated pace, with a potential for releasing initial guidance by the end of 2023.

Comments on the consultation paper are requested by September 9, 2022.

Review the press release and consultation paper, consultation overview, video introduction and an At a Glance summary on the IPSASB's website.

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IAASB Issues New Non-Authoritative Guidance on Fraud in an Audit of Financial Statements

May 05, 2022

On May 5, 2022, the International Auditing and Assurance Standards Board (IAASB) released non-authoritative guidance, "The Fraud Lens – Interactions Between ISA 240 and Other ISAs". The guidance illustrates the relationship and linkages between International Standard on Auditing (ISA) 240, "The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements", and other ISAs when planning and performing an audit engagement and reporting thereon.

Review the press release and guidance on the IAASB's website.

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Basis for Conclusions – Government Not-for-Profit Strategy

May 05, 2022

On May 5, 2022, the Public Sector Accounting Board (PSAB) released its Basis for Conclusions for its Government Not-for-Profit (GNFP) Strategy Decision, which provides an overview of key feedback from stakeholders and how PSAB responded.

Summary of responses

What PSAB asked − Do you agree the proposed option, Option 2 – PSAS incorporating the PS 4200 series with potential customizations, best meets the Canadian public interest?

What you said − Option 2 will help improve comparability of the GNFPO financial statements. However, there was some uncertainty about how the PS 4200 series would be incorporated into PSAS and what customizations might be proposed.

What PSAB decided to do – Proceed with Option 2 as PSAB’s GNFP Strategy after careful consideration of feedback to the Consultation Papers. An implementation plan will be developed, setting out how to go about incorporating the PS 4200 series into PSAS.

Review the Basis for Conclusions on the PSAB's website.

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